End of tax year checklist for UK contractors, small businesses and tradespeopleBefore you know it, the first quarter of the year has flown by. The jobs are piling up and you’re stuck knee-deep in admin. Just when you think life couldn’t get any busier, you realise the end of tax year is just around the corner – again!
The end of tax year gets a bad rap for being a long job of organising receipts and reconciling accounts. Every year there’s a high number of tradespeople in the UK that wish they’d been better prepared.
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For first-time contractors, year-end can be a daunting task. In saying that, the annual deadline can still come as a shock to even the most experienced tradespeople – if they’re not ready for it.
If you work with an accountant, it may be worth giving them a call or setting up a meeting with them. They’ll help you give you specific advice on your situation and help make a plan to guide you so you don’t miss those all-important filing deadlines.
For those without an accountant – all is not lost! We’ve created a checklist to help you tackle your year-end accounting and start the new tax year off on the right foot.
Short on time? Jump ahead!
- 1. Know your deadlines
- 2. Getting ready for tax time
- 3. What you need to know about CIS
- 4. End of tax year checklist for UK tradespeople
- 5. Financial planning
- 6. Make things easier
1. Know your deadlines
One of the main documents you need to file to the HMRC and Companies House is your tax return. This is due 12 months after the end of the accounting period it covers (for most self-employed UK tradespeople who are not a limited company, this will be 5 April).
From 1 April, it will be mandatory for all UK tradespeople who are VAT-registered to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.
Then there’s a separate deadline to pay your corporation tax bill. This is usually nine months and one day after the end of the accounting period.
If you have employees on your books, payment summaries need to be sent by 31 May.
Lastly, the Companies House requires your annual accounts within nine months of your year-end. If this is your first year-end as a contractor, you have a little more time — the Companies House will only need your annual accounts within 21 months of your business registration date.
What happens when you miss a deadline?
You want to avoid the late penalty fees that come with missing any of your filing deadlines. These increase over time, so if you miss more than one, it’ll cost you a few pennies and your trade business will end up on the back foot.
2. Getting ready for tax time
What needs to be filed with HMRC
- Company tax return: your income minus expenses and any tax allowances. Your profit will be used to calculate how much corporation tax you must pay for the last accounting period.
- Annual accounts: an income statement (showing your profit or loss for the last tax year) and a Statement of Financial Position. This gives a snapshot of the value of your trade business based on your assets, liabilities, capital and reserves.
What needs to be filed with the Companies House
- Depending on your individual situation, you may also need to submit your Statement of Financial Position with the Companies House.
Don’t forget your VAT return
If your trade business is VAT-registered, you’ll likely have a VAT return date at the same time as year-end.
3. What you need to know about the Construction Industry Scheme (CIS)
The Construction Industry Scheme was formed to prevent subcontractors from avoiding tax payments. Contractors are now obligated to deduct tax from subcontractors' pay before they get it, and hand it straight to HM Revenue and Customs (HMRC). These deductions go towards subcontractors' tax and National Insurance.
Contractors must be registered as part of the scheme. Subcontractors aren't forced to register, but the deductions will be at a lower rate if they do.
For more information, check out our Construction Industry Scheme overview.
4. End of tax year checklist for UK tradespeople
Before you can file any documents with HMRC and Companies House, you need to get your office in order.
1. Round-up outstanding invoices
Unpaid invoices slipped through the cracks? Now is the time to send out reminders and follow them up. Collect as much of the outstanding cash as you can. That way, when it’s time to reconcile your accounts, they’ll be accurate.
2. Log all business expenses
When you pay for something necessary for the everyday running of your business, it’s a business expense that you can claim. Every business expense claim reduces your tax bill and leaves more cash in your business. To ensure you maximise these tax benefits, get your business expenses in order. Here’s more information on what you can and can’t claim as a business expense.
3. Organise your paperwork
When putting together your business statements, make sure you have all the paperwork to prove your incomings and outgoings. This means copies of bank and loan statements, invoices from suppliers, any credit card or hire purchase statements, records of payments to other contractors or employees and receipts for any expenses (including any asset purchases or costs for maintenance).
The HMRC requires you to keep your records for at least five years after you’ve submitted them. They also require that you file your returns electronically through compatible accounting software. Integrating your accounting and job management systems can streamline this process – and make it easy for you to access your records with the click of a button.
4. Do a stocktake
For tradespeople that keep products and materials, you’ll need to do a stocktake. Use this opportunity to adjust stock quantities where needed and generate an up-to-date inventory list.
5. Finalise payroll
Got staff on your books? Provide your employees with payment summaries (these need to be sent by 31 May) and determine your Superannuation requirements.
5. Don’t stop there – do some financial planning
Reviewing and preparing for the next tax year is the most important part of the year-end process. Once you’ve reconciled your accounts, sorted your paperwork and collated your documents for filing, you should review the current financial health of your business.
With your books in order, you can assess how well your business is performing financially – and make any necessary changes for the year ahead.
There might be areas where you can reduce your expenses or get better value for money by switching vendors. You could take on a new apprentice, hire an accountant to help you manage your accounts, or invest in new equipment. Starting a new tax year fresh will help to ensure you get the most out of any changes you make – and save you time and money long-term.
6. Making the end of tax year easier
When you do your end of tax year admin, it will become apparent how tedious manual admin systems are. It doesn’t matter how organised you are, paper and spreadsheets are clunky. They’re difficult to track and maintain and they’re time-consuming. The longer you spend on your admin, the less time you spend on the tools.
Let technology do the heavy lifting
Streamlining your workflow processes using cloud-based tools can help you reduce the time you spend on your weekly admin tasks and end of tax year preparation too.
- Quick quotes and easy invoices. Sending quotes and invoices from your home office computer is fine and dandy – but it can be limiting. Having the capability to quote, invoice and chase payments while you’re on-site or in your van can help reduce the hours you spend chained to your desk. Also, automated payment reminders will help keep unpaid invoices to a minimum. When it comes time to reconcile your accounts, job management software will give you peace of mind that they’re 100% accurate.
- Speed up data processing. When you manually transfer data from your job book or timesheets into Word or Excel, you’re duplicating your work. Using a system that automatically triggers these actions (without you needing to lift a finger) will improve the speed and accuracy of your data while eliminating unnecessary double-handling.
- Integrate accounting and job management. Working with systems that can be synced together will allow you to streamline processes right across your business. This means throughout the year you can reduce the time you spend on your admin, get real-time visibility of your cash flow and have greater control over your business.
Tradify plugs seamlessly into the following accounting software:
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The end of tax year can be easy
Taking the time to get your tax in order and form a plan of action will go a long way in helping you through this busy period. Ideally, when the end of tax year rolls around, reconciling your accounts should only take a matter of minutes. Using the right tools to streamline your admin processes will help you run your business more effectively and take the hard work out of the end of tax year.
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Please note: this article is a basic overview of what’s required for your year-end accounts in the UK and is not intended to be financial advice. We strongly recommend speaking to an accountant about your individual situation before filing your returns. For more detailed information, visit www.gov.uk.